The Dow Jones Industrial Average fell 47.15 points to close at 12,896.67, led by JPMorgan and BofA. The Dow was down more 90 points at the lows of the session.

The S&P 500 slipped 6.44 points to end at 1,367.58. The Nasdaq eked out a gain of 0.04 points to finish at 2,976.12.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, closed above 17.

Among the key S&P sectors, financials led the laggards, while techs gained.

Stocks initially tumbled at the open after grim comments from ECB President Mario Draghi and a round of interest rate cuts by major central banks.

“When the economic environment is as difficult as it is, lowering interest rates is a sign of underlying problems,” said Dan Greenhaus, chief global strategist at BTIG on CNBC’s “Fast Money Halftime Report.” “Unless there is some reason to be optimistic, which there isn’t necessarily, lower interest rates is a sign of something bad.”

Earlier, the ECB slashed its interest rateto a record low of 0.75 percent and its deposit rate to zero in an effort to help tackle the ongoing euro zone crisis.

ECB President Mario Draghi warned that economic growth in the euro area "continues to remain weak," with heightened uncertainty weighing on confidence and sentiment. Draghi also added that the euro zone economy was subject to downside risks.

And the Bank of England launched a third round of monetary stimulus, announcing it would print more money and buy 50 billion pounds ($78 billion) of asset purchases to help the economy.

China's central bank also cut its interest rates for the second time in two months to help support its slowing economy.

On the employment front, private employers added 176,000 jobs in June, according to the ADP National Employment Report, beating expectations for a gain of 105,000 positions.

In addition, weekly jobless claims dropped 14,000 to a seasonally adjusted 374,000, according to the Labor Department, marking the biggest decline since April. The four-week moving average for new claims fell 1,500 to 385,750.

Both reports come ahead of the key government non-farm payroll report on Friday. Economists surveyed by Reuters expect to see a gain of 90,000 in June following an increase of 69,000 in the month prior.

Also on the economic front, the U.S. service expanded less than expectedin June to 52.1 from 53.7 in May, its lowest level since January 2012, according to the ISM's services index.

“Although we expect some short-term choppiness, we remain bullish,” said Joe Bell, senior equity analyst at Schaeffer’s Investment Research. “The negative sentiment is near their lowest levels since March 2009 and that kind of sentiment backdrop is going to be a catalyst for the rest of the year.”

Netflix surged almost 15 percent after CEO Reed Hastings disclosed that the company's streaming service surpassed 1 billion hours in June for the first time.

Ratings agency Moody's changed its outlook on Barclays to "negative" from "stable," citing the uncertain management outlook after recent departures in the light of the Libor scandal.

Many retailers posted weaker-than-expected same-store sales in June, as consumers pulled back on spending amid concerns about jobs and the economy. Macy's , Costco and The Buckle were among some of the companies that disappointed.

Auto parts supplier Visteon said it would offer some $800 million to take full control of South Korean car air conditioner maker Halla Climate Control, but analysts cautioned that a key shareholder may hold out for more.

Buyout fund CarlyleGroup said it had acquired 49 percent of China's MandarinHotel Holdings for an undisclosed sum, giving it control of the company.